Michael Micciche, Head of Institutional Product Marketing at Wachovia, sent me the column below, from a Dow Jones web site.
The writer, Chris Pummer, expresses his belief in a rosy--well, rosy-ish--future, and posits that if we're not careful, gloomy predictions could turn into a self-fulfilling prophecy. Pummer offers five examples of how he feels we are trying to talk ourselves out of the roses and into recession.
"My question has always been, okay, so we're heading for recession. are we all going to die? is it never going to end? is this the beginning of the apocalypse?
"The press would have us stock up on canned water and crackers and head for the fall-out shelters...."
Chris Pummer doesn't think that time has come. Here's what he does think:
In a column on the Dow Jones Market Watch web site, "Five signs we're jawboning ourselves into a recession," posted Thursday, November 29, 2007, Pummer says, "U.S. consumers have taken $3-a-gallon gas and a drop in our home equity in stride. Yet the media seems hell-bent on convincing us multinational banks' subprime mortgage losses and a weak dollar will torpedo the economy in a way the stock market's collapse, mass layoffs and 9/11 scarcely did in 2001."
He quotes Mitchell Marks, an organizational psychology professor at San Francisco State University, as saying, "There is a herd mentality with prevailing outlooks on economic conditions because few of us want to be caught unprepared.....If people get bombarded with a grim message, that herd grows bigger and stronger."
Pummer goes on to list five signs that he says mean we're getting needlessly skittish. Among them is the media's reaction to Federal Reserve Chairman Ben Bernanke's prediction November 8 that the economy would "slow noticeably" in the months ahead.
"Those two words were highlighted in broadcast reports and headlines as if they were warning of a coming economic Armageddon," Pummer says. He reminds us that the word "noticeably" means "perceptibly," not calamitously.
"In the last two quarters, the economy grew nearly 4%--well above the 2.5% to 3% sweet spot former Fed Chairman Alan Greenspan aimed for in setting monetary policy. Economic growth could slow by a third and still be within that range."
He also cites the reaction to Starbucks's recent report that its third quarter sales fell by 1%.
"Many analysts trumpeted that as a sign we're all into a belt-tightening mode that could crimp consumer spending, which drives two-thirds of economic growth," he says. However, he attributes the drop to Starbucks's "brazen price hikes" this year despite rising competition from lower-cost franchises.
Pummer concludes, "Consider this: the combination of the NASDAQ's 80% drop, a two-thirds rise in our unemployment rolls and the trauma inflicted by a puissant Arab extremist together produced just one of the shallowest recession in U.S. history. You gotta believe it'll take more than a passing credit squeeze to cause the world's greatest economy to falter again."
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